Every credit union is unique, and every CEO places a different emphasis on how they want their executive compensation and benefits package tailored, which makes an assessment of ‘market rates’ for executive benefits and compensation challenging. If you’re a board member you want to be both fair to your executives, provide a combination of compensation and benefits with the right mix of incentives to ensure alignment with your strategic goals, and also fulfill your fiduciary obligation to fellow credit union members.
As an executive, you want to make sure that your compensation and benefits are competitive and fit your personal needs, and are also flexible enough to adapt as those needs change throughout your career.
One great way to find out where your credit union stands relative to the market is with the NAFCU-Burns-Fazzi, Brock (BFB) Executive Compensation and Benefits Survey (free to survey participants).
First introduced in 2007, the NAFCU-BFB Survey was created to better understand the compensation and benefits for the top five executives of Federal credit unions. The sponsors – NAFCU, NAFCU Services Corporation, and Burns-Fazzi, Brock – envisioned creating an information resource to help Federal Credit Unions with the decisions they face regarding executive compensation and benefits. The findings of this study come from a broad spectrum of Federal Credit Unions - all are invited to participate in the survey, regardless of whether they are NAFCU members or not. The independent firm of Clark & Chase Research, Inc. conducts this annual study, and all responses are confidential.
This year, 428 credit unions participated in the survey, and this year’s survey contains plenty of key findings and insights. But it is important to note that this survey is just one tool that should be used in the context of a broader review of compensation and benefits at your credit union. Means and medians can be difficult to interpret, and should not be taken as absolutes. Every effort was made in the survey to adjust for credit unions with different asset bases, and for varying market conditions in different parts of the country.
So I would caution you to not take this survey as a single source and base all of your compensation and benefits decisions solely on the data and insights the survey found. Instead we would suggest that you use this as one data point in a more comprehensive process.
BFB does have the ability to produce a custom report for any individual credit union that is more tailored to their unique profile, comparing 30 other credit unions with similar characteristics. If you are interested, I’d suggest you contact them directly – more information at www.nafcu.org/BFB.
Some of the more interesting findings:
- One in four Federal credit unions are currently reviewing or planning to review their executive compensation plans. (Not that surprising, really, given the state of the economy and executive turnover in the industry. This is also a best practice, i.e., an ongoing review of compensation plans to ensure they still meet the needs of the credit union.)
- In 2012, 13% of Federal credit unions are reviewing their current nonqualified benefit plans or considering adding them to their executive compensation plans. (I expected this number to be higher, given the appeal and broad applicability of non-qualified plans. But it could well be that uncertainty about the economy is affecting this benefit category.)
- The median increase in base salary for top executives from 2011 to 2012 was two percent. (Given the variable rate at which our economy is recovering, this could well have been skewed by outliers on the lower end of the spectrum.)
- In 2011, top executives achieved 89% of their potential bonus, on average. (Personally, I found this encouraging and a sign that our industry is recovering, again with the assumption that outliers on the low end may have skewed the data.)
Clearly, these are top-level results aggregated across the country and across all credit unions, and the actual survey presents findings broken down by total asset size.
In addition, the report includes suggestions for what decision-makers should know when reviewing and using compensation surveys.
Request a copy of the 2012 NAFCU-BFB Survey here.
Post written by Dave Frankil, President, NAFCU Services Corp.